The Tragedy of Dying Without a Will

He who comes for the inheritance is often made to pay for the funeral.

— Yiddish Proverb

The COVID-19 pandemic has brought many of us face-to-face with the nature of our mortality. We might try hard to stay fit and healthy, but it could take just a chance encounter with an asymptomatic carrier for us to end up in the ICU struggling for life.

Death can come at unexpected times. After we're gone, what happens to those we leave behind?

The Straits Times reported in 2017 that less than 20% of Singaporeans had drawn up a will. Some think it's costly and tedious. Others think it's taboo to talk about death. However, without a will, your death would be made only more difficult for your loved ones.

A close acquaintance recently illustrated some of the problems that could emerge. Her husband had passed away over 20 years ago. Unable to financially support herself on her single income, she was forced to sell her property and downgrade to a smaller home, and scrimp and save just to get by. Recently, she discovered that her husband actually had lots of money saved in various banks! All that money had just been sitting idly there all this time. Had her husband only made a will notifying her of those funds, she would have been spared more than two decades of financial hardship.

Her case is far from rare. In October 2019, the Ministry of Finance noted that there was over $240 million in unclaimed monies left with the Government. The bulk of this belonged to deceased individuals who had failed to nominate anyone to receive their CPF funds. It is unfathomable to think that nobody would have stepped up to claim that money if they had known. The only explanation is that they were totally unaware of the funds.

As the saying goes, if you fail to plan, you plan to fail. When it comes to wills and other end-of-life matters, it's your loved ones who will suffer from that failure. Here are some other examples of problems that could arise in the absence of planning:

1. Housing debt

Should you die with a huge mortgage remaining on your home, the bank will demand that the outstanding loan either be paid in full, or the beneficiary of the home (e.g. your spouse or children) will need to immediately take up a new home loan to repay the mortgage on new financing terms.

If none of your beneficiaries are working (e.g. if your spouse is a homemaker and your children are still studying) and do not have any appreciable income, they could be forcibly evicted from their home. The bank will then force-sell the property to recover as much of the outstanding loan plus interest payments due to them.

If this happens while property prices are depressed, the sale of the property may not be enough to cover the outstanding debt. In that case, the remaining debt will immediately be due upon the estate of the deceased owner. Let's not even talk about the stress of needing to urgently find new accommodation and move house while in the process of grieving.

2. Forced liquidation of hard assets

Without proper instructions in place, hard assets such as properties, jewellery and other precious goods may be sold before being distributed to your beneficiaries. This is especially so if one or more beneficiaries disagree about holding on to the assets and insist on receiving their fair share in cash.

As such, they may push through with the sale of your beloved property at a lower price than what they could have received had they been willing to be patient. Or you may have a treasured family heirloom you would have wanted to pass on to a child or grandchild, but without that stated in writing, there would be no way to keep it from being sold.

3. Investments

You may be a stock wizard or astute investor. However, your heirs may have no knowledge or interest in the markets. Leaving them with your portfolio without any instructions on how to manage it would be a recipe for disaster. They might immediately sell your investments at a price vastly lower than their true worth, or receive bad advice and lose most of the assets through unwise and highly risky investments.

4. Lack of a full account of your assets

Without a proper list of your assets and a plan for transfer, your heirs may not know the full extent of everything you own – just like in the earlier example. While speaking with a client on his legacy plan, he came to the sudden realisation that much of his assets, which were in unlisted investments, were known only to him. As such, his wife and family would not have any idea of their existence were he to suddenly die.

5. Overseas assets

You might own property and equity assets overseas. Again, without a proper plan, your beneficiaries may have a difficult time transferring or selling those assets. They would have to seek out and engage foreign lawyers, brokers and agents in each individual jurisdiction for the probate process, while navigating the complex web of transfer and tax regulations in each country.

In the end, they would have to spend a lot of resources and monies on fees to unfamiliar lawyers, consultants and agents, as well as on settling various taxes, including income tax (from rental), capital gains tax, inheritance tax and so on. These are different for each jurisdiction.

All this is assuming that your beneficiaries would even have the ability to pay all those upfront charges before getting access to your assets. At the end of the day, there is a distinct possibility that the final realised value – less the total cost of liquidating the asset – may be vastly lower than its market value.

The Importance of Planning

Many of us spend more effort trying to build up our assets than working out what will happen to all of it when we pass. While you're still around, plan ahead to minimise the costs (and time) required to eventually transfer those assets to your loved ones.

Creating a proper transfer plan requires a thorough thought process, detailed discussions, and a systematic way to execute the solution. This goes beyond a will and can involve several components – with the creation of a trust, the execution of a Living Power of Attorney (LPA), an Advanced Medical Directive (AMD) and the will itself all closely integrated.

In essence, you'll be creating a comprehensive legacy plan. Drafting the will is just one part. It is thus important to work with a trusted adviser who can help you think through the critical aspects of your wealth distribution, and then coordinate and marshal the necessary specialists to execute the different components of your plan.

The first step is to recognise the importance of thinking through your legacy plan and creating your will. This is true regardless of how much assets you have. What you leave behind for your beneficiaries becomes much more meaningful if they know that each bequeathment was thoughtfully done. They will also be grateful for your consideration and forethought in creating directions on how to transfer your assets, sparing them the hassle and pain of doing it all themselves.